The Materials sector bulls’ eyes are fixed on long-term resistance at the 500 level as relative performance rallies from long-term relative support. Chemicals and Construction Materials have broken out to the upside while Metals & Mining and Containers & Packaging test resistance. Intermediate-term breadth received a boost in the August 10th trading session and could provide the fuel needed for the sector to break out to the upside.
S&P 500 Materials
After breaking out of the declining 50-day moving average, Materials are not testing long-term resistance and the breakdown zone at the 500 level. Relative to the S&P 500, the group has rallied long-term relative support at the lows of Q4 2021. Bulls want to see a combination of a breakout above the 500 level and relative support held to the upside to have confidence that the upside move from the July lows could continue.
Chemicals have broken out of 810 resistance to the upside in the August 10th trading session after breaking out of the declining 50-day moving average late last month. Relative to Materials, the group is testing the long-term relative support at the highlighted zone after breaking out to the upside in the last week of trading. Bulls want to see these levels held.
Metals and Mining are testing resistance at the 203 zone after consolidating below the declining 50-day moving average over the past month of trading. Relative to Materials, the group has bounced from long-term relative support at the highlighted zone below the ratio’s declining 50-day moving average.
Containers and Packaging continue to be a chop fest after losing the 297-breakout zone to the downside below the declining 50-day moving average. Relative to Materials, the group is testing the lower bound of the relative trading range that’s plagued the group since the start of the year.
Construction Materials continue its recent strength after breaking out of 340 resistance to the upside in last week’s trading session. Relative to Materials, the group continues its strength in trading above the long-term relative breakout level at the highlighted zone above the ratio’s rising 50-day moving average.
Breadth
The percentage of components trading above their 50-day moving averages received a boost to the upside above the 65% level in the August 10th trading session. There were 244 instances since 2000 where the percentage of Materials components trading above their 50-day moving average crossed above the 65% mark for a median gain in the sector of 3.31%, with a 67.49%-win rate over the following quarter. It’s worth noting that median gains have tended to peak 59 trading days out at 3.34% on a slightly improved 68.72%-win rate, so consideration should be given to hold times.
This note is a preview of our Sector Deep Dive. See our thoughts and more in the full report.
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